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Capital Markets

M&A: Bayer turns white knight once again

Bayer has played white knight for the second time this year. The German chemicals company rescued Schering from the clutches of Merck in March with a €16.5 billion offer

It followed this up last month with another rescue exercise, effectively saving the euro corporate market from a reputation for botched M&A deals it has so far developed in 2006, with a well-received and well-executed €3 billion multi-tranche deal despite soft market conditions. The success of this issue was in marked contrast to the year’s other jumbo M&A related deal for Telefónica (see Euromoney, February 2006, page 18).

More generally, it has been a poor year for corporates refinancing M&A transactions in the euro market. Of the M&A related new issues brought by Telefónica, BAA, Bouygues and Saint-Gobain, not one was sold without incurring criticism from market participants. Although the chorus of disapproval for the Spanish telecom company’s bond in January was by far the loudest, spreads on bonds from both Bouygues and Saint-Gobain have widened from their new issue levels this year. BAA was very unlucky to have been subject to unwelcome attention from Ferrovial just as it was refinancing the purchase of Budapest Airport and was forced to introduce change of control covenants at the last moment.

“From a communication perspective Bayer was very explicit during the roadshow that they would not return to the senior debt market this year, which was helpful,” says Jean-Marc Mercier, deputy head of syndicate at HSBC, joint lead on the bond alongside Citigroup and JPMorgan.

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